KSA Real Estate Market Review | Q1 2021
- Saudi Arabia’s office market remains subdued amid the COVID-19 pandemic
- Aligned with 2030 vision, the residential market in Saudi Arabia continues to grow
- Saudi Arabia’s retail market remains under pressure as rents slip and vacancies rise
- Saudi Arabia’s hospitality market remains robust during Q1 of 2021
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Saudi Arabia Real Estate Market Review Q1 2021
Office Market Review
Saudi Arabia’s office market remains subdued amid the COVID-19 pandemic
- Grade A rents in Riyadh increased marginally by 0.5%, whilst Grade A rents and Jeddah and DMA declined by 2.8% and 3.4% respectively in the year to Q1 2020.
- Grade B rents marginally declined in Saudi Arabia’s 3 major markets.
- Grade A and B vacancy rates increase in Riyadh and DMA.
While office rents soften in the wake of the COVID-19 pandemic in Saudi Arabia’s major cities, overall business conditions continue to improve. Indeed, the unemployment rate for Saudi citizens fell to 12.6% in Q4 2020, down from 14.9% in the previous quarter.
Separately, Q4 2020 was the strongest quarter of investment interest in Saudi Arabia since data compilation began in 2005, with 466 foreign investment licenses being granted by the Ministry of Investment.
Residential Market Review
“Aligned with 2030 vision, the residential market in Saudi Arabia continues to grow”
- Average sales prices of residential apartments increased in all three major markets.
- Average sales prices of residential villas decreased in Riyadh, Jeddah and DMA due to subdued demand, stemming from affordability challenges.
- Value of new mortgages increased by 38% in the 12 months to February 2021.
Aligned with the 2030 vision of boosting the homeownership rates to 70%, the residential market in Saudi Arabia is witnessing a boom of sorts. The volume and value of the residential transactions increased noticeably in Saudi Arabia’s major cities. The exceptional increase in the volume and value of residential transactions is underpinned by an increase in the mortgage uptake, with 26,800 new contracts were recorded in February 2021. Total housing stock is also predicted to increase across Saudi’s major cities, with Jeddah’s supply centralized around middle-income housing and DMA’s upcoming supply mainly consisting of high-quality apartments and townhouses.
Retail Market Review:
Saudi Arabia’s retail market remains under pressure as rents slip and vacancies rise
- Mall rents fell by 2.5%, 2.7% and 2.6% in Riyadh, Jeddah and DMA respectively.
- Riyadh’s retail stock stands at 2.87 million sqm of GLA.
- Retail stock in Jeddah stood at 1.95 million sqm of GLA and in DMA at 1.14 million sqm of GLA.
Retail market performance continued to soften across all segments in year to Q1 2021. Regional and super-regional malls lease rates declined, albeit at a slower rate compared to community malls. Market wide vacancy rates dropped across all 3 major cities. However, malls where landlords have adapted digital transformational strategies to redefine consumer experiences were able to attract new demand and retain existing tenants.
Hospitality Market Review:
Saudi Arabia’s hospitality market remains robust during Q1 of 2021.
The resumption of the Umrah pilgrimage underpinned the performance of Jeddah’s hospitality market in the year to March 2021.
Saudi nationals continue to travel domestically due to international travel restrictions.
Riyadh’s hospitality market continued to soften, given its reliance on the corporate tourism which largely remained subdued due to international travel restrictions.
Saudi Arabia’s current major hospitality markets in Riyadh, Jeddah and DMA are expecting an increase in the supply by 2023, with hotel rooms in these locations expected to increase by 25%, 53% and 23%, respectively.
“Saudi Arabia holds the world’s largest hotel construction pipeline”
Jeddah’s hospitality market registered an outperformance in the year-to-date March 2021, with ADRs rising by 18.7% over the last 12 months, while occupancy level decreased marginally.
Nonetheless, Saudi Arabia holds the world’s largest hotel construction pipeline, which is expected to deliver a 61.1% increase in the Kingdom’s hotel rooms over the next three years.
View the report here